Connect with us

Childhood and Intergenerational Poverty The Long-Term Consequences of Growing Up Poor

Introduction

Children growing up in low-income families face many challenges
that children from more advantaged families do not.
1 These children are more likely
to experience multiple family transitions, move frequently, and
change schools.
2 The schools they attend are
less well funded, and the neighborhoods they live in are more
disadvantaged.
3 The parents of these children
have fewer resources to invest in them and, as a consequence, their
homes have fewer cognitively-stimulating materials, and their
parents invest less in their education.
4 The stress of living in poverty
and struggling to meet daily needs can also impair parenting.
5

Social and economic deprivation during childhood and adolescence
can have a lasting effect on individuals, making it difficult for
children who grow up in low-income families to escape poverty when
they become adults.
6 Because the negative effects of
deprivation on human development tend to cumulate, individuals with
greater exposure to poverty during childhood are likely to have
more difficulty escaping poverty as adults. In this research brief,
we examine patterns of exposure to poverty during childhood and the
association between these patterns and poverty in early and middle
adulthood. Data for this study come from the Panel Study of Income
Dynamics (PSID), which collects information on the social and
economic status of PSID families and their offspring every year.
7

We find that individuals who grow up in poor families are much
more likely to be poor in early adulthood. Moreover, the chances of
being poor in early adulthood increase sharply as the time spent
living in poverty during childhood increases. At all levels of
poverty during childhood, African-Americans are more likely than
whites to be poor in early and middle adulthood.

Background

“The American Dream” is rooted in the idea of upward
mobility, the idea that individuals and families can escape the
confines of poverty and disadvantage through hard work and
perseverance. How widespread is upward mobility across generations?
How do parents’ socioeconomic characteristics influence their
children’s success? Do children from more affluent families
remain at the top of the economic structure? Are poor children able
to escape poverty as adults? How does race impact income mobility,
especially mobility out of poverty? Intergenerational economic
mobility is a key indicator of the degree of equality of
opportunity in a society.
8 Even though the limited
availability of long-term, longitudinal data makes economic
mobility research challenging,
9 social scientists have been
studying intergenerational mobility for some time.

A number of researchers have investigated intergenerational
economic mobility by examining the correlation between
parents’ and children’s income and earnings. For
example, Becker and Tomes report a weak correlation (0.2) between
parents’ and children’s incomes.
10 By the 1990s, other
researchers’ estimates of the intergenerational income
correlation were stronger (closer to 0.4).
11 Mazumder, however, contends
that traditional approaches to measuring the correlation between
parents’ and children’s income and earnings tend to
systematically underestimate this relationship, leading researchers
to conclude that there is greater economic mobility in the United
States than actually takes place.
12 Using Survey of Income and
Program Participation (SIPP) earnings data, Mazumder estimates a
stronger correlation between parents’ and children’s
earnings to be 0.6.
13 Thus, the literature suggests
that the actual correlation between parents’ and
children’s income ranges from 0.4 to 0.6, suggesting that
intergenerational economic mobility in the U.S. is lower than
previous studies found.
14 Mayer and Lopoo caution that
all estimates of an intergenerational income or earning correlation
can vary depending on the time frame used by the researchers.
15

Recently, Isaacs’ analysis of income mobility using data
from the PSID differentiates between the absolute and relative
economic mobility of children. For example, she reports that
two-thirds of adult Americans earn more than their parents did 30
years earlier. Thus, in absolute terms, most adult children
eventually have greater incomes than their parents. Isaacs,
however, also finds that relative income mobility among children is
limited. That is, children who were born to families at the top of
the income structure have the highest probability of being in the
highest income strata as adults, while those born at the bottom
have the highest probability of being poor as adults. Isaacs
suggests that “about half of the difference in income between
families in one generation persists into the next
generation.”
16

Studies focusing on the intergenerational transmission of
poverty find that while individuals can break out of
intergenerational cycles of poverty, they are less likely to do so
than is commonly thought.
17 Moreover, when subsequent
generations do escape poverty they are likely to move into the
ranks of the slightly less poor.
18 Poverty exits depend on
numerous factors such as educational and employment opportunities,
the availability of role models, and child and parent aspirations,
19 as well as a child’s
birth order and when in the child’s life poverty occurs.
20

Researchers also find that the intergenerational correlation
between incomes and earnings vary widely by race. For example,
according to Hertz, 17 percent of whites who were born in the
lowest income category between 1942 and 1972 remained there as
adults while 42 percent of African-Americans did so.
21 Similarly, in a separate
study, Isaacs finds that not only do African-American children live
in families with lower average incomes than whites, but
“African-Americans experience less upward mobility and more
downward mobility than whites.”
22 In general, scholars have
found that race matters a great deal in intergenerational economic
mobility.

Although researchers have examined how having poor parents
influences the chances of being poor as an adult
23 and how the timing of poverty
in childhood influences economic success in adulthood,
24 little attention has been
given to understanding how the duration of exposure to poverty
during childhood influences the chances of being poor in early and
middle adulthood. In this study, we use data from the PSID to
examine individuals’ patterns of exposure to poverty during
childhood and how these patterns are associated with poverty status
at the ages of 20, 25, 30, and 35. Because earlier studies have
found stark racial differences in patterns of exposure to poverty
and intergenerational poverty,
25 we examine these patterns and
associations separately for whites and African-Americans.

Data and Methods

We use data from the Panel Study of Income Dynamics to study
intergenerational poverty. The PSID is a publicly-available,
nationally representative panel study conducted annually or
bi-annually since 1968 by the Survey Research Center at the
University of Michigan. In the PSID, individuals from original
sample households are re-interviewed every year, whether or not
they are living in the same dwelling or with the same people.
Adults are followed as they grow older, and children are observed
as they advance through childhood and into adulthood, forming
family units of their own. This procedure produces an unbiased
sample of families each year as well as a continuously
representative sample of children born into families each year. As
of 2005, the PSID data included longitudinal information on 67,271
individuals who were either members of one of the original sample
families, the offspring of one of those individuals, or their
co-residents.

Our sample includes all white and African-American children born
into responding sample families between 1970 and 1990. Because the
PSID sampled the original families in 1968, the data include too
few Latinos to compute reliable and representative estimates for
this population. The youngest individuals in our sample were born
in 1990 and were age 15 at the time of the 2005 interview. The
oldest individuals were 35 at the time of the last interview.
Individuals with poverty information available for fewer than half
of the study years were excluded from the analysis. Sample
attrition has been modest and has not generally affected the
representativeness of the sample.
26 Nonetheless, sampling weights
that accounted for attrition were employed in all analyses.

Recently, Grieger, Danziger, and Schoeni developed a strategy
for constructing poverty measures using the PSID that are
comparable to official Census Bureau estimates using the Current
Population Survey.
27 We use this new strategy
(called PSID-4 by the authors) to construct poverty indicators for
each individual for each year of their childhood (ages birth to 15
years old) and for the ages of 20, 25, 30, and 35 years old. We
then use these poverty indicators to compute the percentage of
childhood years spent living in poverty (<100 percent Federal
Poverty Line). All results presented below are weighted using the
PSID individual-level core sample weights.

Poverty During Childhood

Figure 1: Time spent living in poverty during childhood (ages
0–15), by race: Children born between 1970 and 1990

Exposure to poverty during childhood varies widely (see Figure
1). Most children (65 percent) never experience poverty between the
ages of birth and 15 years old.
28 Of those who are poor at some
point during their childhood and early adolescence, most (69
percent) are poor for less than half of that time. However, one in
10 children spend at least half of childhood living in poverty and
6.4 percent are poor for three-quarters or more of childhood. On
average, a child spends nearly 14 percent of his or her childhood
living in poverty. Children who were ever poor during childhood
spend an average of 47 percent of childhood living in poverty.
29

Figure 2: Time spent living in poverty during early, middle, and
late childhood, by race: Children born between 1970 and 1990

African-American children and younger children are more likely
to experience poverty than white children and older children. While
nearly three-quarters of white children never experience poverty
during their childhood, fewer than one-third of African-American
children are never poor (see Figure 1). Nearly one-quarter of
African-American children live in poverty for more than
three-fourths of their childhood and more than one-third are poor
for at least half of their childhood. On average, a white child
spends only 8.9 percent of childhood living in poverty. By
contrast, an African-American child is poor for nearly two-fifths
of childhood on average. For both white and African-American
children, the chances of being poor declines slowly but steadily
between early and late childhood (see Figure 2).

Intergenerational Poverty: The Consequences of Growing Up
Poor

Adults who were poor during childhood are much more likely to be
poor in early and middle adulthood than are those who were never
poor (see Table 1). Few adults who did not experience poverty
during childhood are poor in early and middle adulthood. At ages
20, 25, and 30, only four to five percent of those adults who were
never poor during their childhood live in poverty. At age 35, less
than one percent are poor.

Poverty rates for adults who were poor during childhood are much
higher, especially for those individuals with high levels of
exposure to poverty during childhood. For adults who experienced
low-to-moderate levels of poverty during childhood (one to 50
percent of childhood years), 12 to 13 percent are poor at ages 20
and 25 and seven to eight percent are poor at ages 30 and 35. For
adults who experienced moderate-to-high levels of poverty during
childhood (51 to 100 percent of childhood years), between 35
percent and 46 percent are poor throughout early and middle
adulthood.

Figure 3: Exposure to poverty during childhood and the
probability of being poor at ages 20, 25, 30, and 35

At comparable levels of exposure to poverty during childhood,
African-Americans are more likely than whites to be poor throughout
early and middle adulthood. For example, while 0.5 to five percent
of whites who were never poor during childhood are poor in their
20s and early 30s, five to eight percent of African-Americans with
no exposure to poverty during childhood are poor. At higher levels
of poverty exposure during childhood, the differences between
African-American and white poverty rates in adulthood are starker.
At low-to-moderate levels of poverty exposure during childhood,
four to 11 percent of whites are poor in early and middle
adulthood, but 19 to 30 percent of African-Americans are poor. At
moderate-to-high levels of childhood poverty exposure, 42 to 51
percent of African-Americans are poor as adults, but only 25 to 40
percent of whites are poor. African-Americans are, therefore,
doubly disadvantaged relative to whites. On one hand, they have
greater exposure to poverty during childhood than whites. On the
other hand, at similar levels of exposure to poverty during
childhood, they are more likely to be poor as adults. It also
appears that low-to-moderate levels of poverty have a particularly
disproportionate impact on African-Americans’ mobility as
compared to whites.

Conclusion

Our examination of PSID data indicates that while most children
never experience poverty, 35 percent of children born between 1970
and 1990 experienced poverty between birth and age 15. We also find
that African-American children are more likely to experience
poverty than are white children. These results have implications
for adults: Individuals who were poor during childhood are more
likely to be poor as adults than are those who were never poor, and
this is especially true for African-Americans. Consequently,
intergenerational poverty and persistent disadvantage impedes
individuals’ ability to achieve the American Dream. Though
there is considerable upward mobility in the United States,
escaping poverty is difficult, and racial disadvantages mean that
mobility out of poverty for African-Americans is far more difficult
than it is for whites.

For fuller discussions of this research see Corcoran in endnote 6 and Mazumder, Bhashkar. 2005a. Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data. The Review of Economics and Statistics 87: 235-255.

28. We examine the time spent living in poverty between the age 0 and 15 years for several reasons. First, some children leave their parent’s families between the ages of 16 and 18 years making it difficult to classify these children’s family poverty status in the latter stages of childhood. Second, this interval allows us to construct equal width 5-year intervals. Third, other researchers studying the timing of poverty during childhood have used these intervals.

29. We also conducted the analysis based on different birth cohorts and there are some variations across age cohort. However, it was not possible to examine intergenerational poverty for all birth cohorts because later cohorts are not old enough to be observed as adults.